Unemployment Rate Falls to Three-Year Low

WASHINGTON, DC-The Department of Labor delivered another round of welcome employment news: in January the economy added 243,000 jobs, dropping the unemployment rate to 8.3%. That is the lowest rate in close to three years. In addition, the pace of jobs added to the economy last month was the fastest in close to a year. If nothing else, Scott Homa, research director for Jones Lang LaSalle, tells GlobeSt.com, the numbers indicate “the national economy continues to gain momentum.”

The job figures outperformed economists’ expectations of only 150,000 jobs created and an unchanged unemployment rate of 8.5%. “There isn’t a lot not to like about this report,” Kevin Thorpe, chief economist with Cassidy Turley tells GlobeSt.com. “November and December figures—which were already strong—were revised up, January data shows job growth is accelerating and unemployment is falling,” Thorpe says. “It blew past even the most optimistic expectations.”

There are too many headwinds remaining to conclude that all is fine, Thorpe adds, “but, my goodness, this is actually beginning to follow the patterns of a real, accelerating recovery.”

For commercial real estate, the employment data signals that fundamentals will continue to strengthen, Thorpe wrote in a client research note released this morning. The manufacturing sector added 50,000 jobs and the retail trade sector added 10,500 jobs for the month. Best of all, the professional & business services sector added 70,000 jobs.

“Job creation has been witnessed disproportionately in the office sector, which is a bullish signal for the national commercial real estate market,” Homa says.

Another positive sign for the office market is the uptick in temporary employment, which is often a precursor to additional growth downstream, Homa continues. “Employers are running near full capacity now and the issues we experienced during the trough of the downturn related to rising sublease inventory and shadow space has gradually become less of an issue,” he adds. Combined with the pullback in new construction, we expect leverage in the market to continue its gradual shift away from tenants and for conditions to become more balanced as the year progresses.”

Unfortunately, Homa goes on to say, even though the unemployment rate has come down substantially in recent months, the national office vacancy rate remains stubbornly high at 17.6%. “The economy has made significant progress in terms of digging out of the recession, and we’ve witnessed seven consecutive quarters of positive net absorption across the country now,” Homa says, “but additional growth is needed to get the office market back to a healthy equilibrium.”